FREE MEETING: KEY TRENDS AND RISKS IN NFT GAMES– REGISTER

droomdroom-logo-mobile droomdroom-logo-mobile-white
  • Bitcoin
  • Altcoin
  • Metaverse
  • NFTs
  • DAO
  • DeFi
  • Adoption
  • Regulation
  • bitcoinBitcoin(BTC)$23,015.00
  • ethereumEthereum(ETH)$1,600.83
  • tetherTether(USDT)$1.00
  • binancecoinBNB(BNB)$300.97
  • usd-coinUSD Coin(USDC)$1.00
  • rippleXRP(XRP)$0.378086
  • cardanoCardano(ADA)$0.363562
  • okbOKB(OKB)$49.80
  • matic-networkPolygon(MATIC)$1.26
  • dogecoinDogecoin(DOGE)$0.081135
DroomDroomDroomDroom
Aa
  • Bitcoin
  • Altcoin
  • Metaverse
  • NFTs
  • DAO
  • DeFi
  • Adoption
  • Regulation
Search
  • Bitcoin
  • Altcoin
  • Metaverse
  • NFTs
  • DAO
  • DeFi
  • Adoption
  • Regulation
Follow US
© Droomdroom. All Rights Reserved.
DroomDroom > Adoption > Want to Set Up a Secure Crypto Hot Wallet? Here’s a Useful Guide
Adoption

Want to Set Up a Secure Crypto Hot Wallet? Here’s a Useful Guide

Last updated: 2023/02/16 at 1:11 AM
By Prachi Kothari Published January 7, 2023 February 16, 2023
Share
17 Min Read
SHARE

Introduction

As of the latest records of CoinMarketCap, there are 537 exchanges. Cryptocurrencies are traded through these exchanges and traders or investors must have access to any of these exchanges to start trading. To ease the process of getting access to the exchanges, a technology of wallets was introduced. There are two types of wallets, hot and cold. The basic distinction between the two is that; a hot wallet requires an internet connection, while a cold wallet does not.

Contents
IntroductionTable of ContentsWhat are hot wallets?Different hot walletsDesktop walletHow does a desktop wallet work?Here is how to set up a desktop hot wallet:Mobile walletHow to set up a mobile hot wallet:Web walletSetting up a web hot wallet:How to install a hot wallet?Seed phrase for hot walletA very important reminder:Hot wallet and security concernsConclusion

💡Historically, financial systems have forced people to leave assets in the custody of others.

Cryptocurrency gives us the opportunity to be in control of our own digital assets and financial futures.

To access this opportunity, we *must* custody our own digital assets. 🧵👇

— MetaMask 🦊💙 (@MetaMask) November 8, 2022

A hot wallet does not store cryptocurrencies. It only stores the keys that are to be used to access the blockchain on which cryptocurrency are stored. Setting up of different hot wallets is simple except for a few variations. The software of the hot wallet must be downloaded and installed on a computer or mobile phone.

9izoiuxHBwgzy7AJNGQ3WWFHT8z3b07Hy8l7dqw8S 0cgKetSCHF2Qv Qa2 XlgbF31PUywhC62YNPUJteOJd xaj7 J7g6FVRIKFvGfLKcYGhurVyiKbAAYe16bujEC80xif X93jSgFO3mnuE8g0q0SkrxtHPeA r0G1fhLL496QMehNtUvcFDlpiOQA

Image Source: Freepik

Below is a quick guide explaining the different types of hot wallets and how to set them up.

Table of Contents

  • Introduction
  • What are hot wallets?
  • Different hot wallets
    • Desktop wallet
    • How does a desktop wallet work?
    • Here is how to set up a desktop hot wallet:
    • Mobile wallet
    • How to set up a mobile hot wallet:
    • Web wallet
    • Setting up a web hot wallet:
  • How to install a hot wallet?
  • Seed phrase for hot wallet
    • A very important reminder:
  • Hot wallet and security concerns
  • Conclusion

What are hot wallets?

A hot wallet is a virtual wallet. You cannot hold these wallets in your hand, but users can access them online. These wallets connect the wallet’s owner and the end user. A set of private keys is used to safeguard the digital assets stored in the wallet. Cryptocurrencies are virtual money. Hot wallets offer accessibility and convenience for financial transactions inside a virtual currency market by storing and protecting holdings.

Hot wallets are connected to the internet. Private and public keys are kept in an app or other piece of software, making using, sending, and receiving your cryptocurrency simpler. However, hot wallets provide a greater risk of hacking because they leave your keys online. Users should enable features like two-factor verification to improve the wallet’s security. There are three types of hot wallets: desktop, mobile, and web.

Almost all new traders prefer a hot wallet. The foremost reason being is that it is free of cost. There is no fee to set up a hot wallet. In 2021, hot wallets accounted for 55% of the revenue. Experts believe that hot wallets will be the next multimillion industry.

Installing desktop wallets allows total user control over the wallet on a desktop or laptop computer. Users can operate mobile-based wallets from their smartphones or tablets. Meanwhile, one can send and store cryptocurrency without installing any application using a web wallet.

Different hot wallets

Desktop wallet

Desktop wallets are applications that run on your desktop or laptop. They have a simple, easy-to-use interface for their users. Web or exchange wallets are constantly online. However, desktop wallets are connected to the internet only when necessary to complete transactions. They are primarily non-custodial; therefore, the wallet owner is solely responsible for protecting their private keys.

6l4htQPfTASP D4h2osTBTICchjnOmcYjjYwN JR37oL uBO 0YQYdNNpgrLh2KP 74rUkLx6LE81V6TOgRFyzKwNkSLBA DCkcXy1a1SmeE e31bWoj9n0nGctW9HVjAzVD 0TUpiOZ

Image Source: Freepik

How does a desktop wallet work?

The working of a desktop wallet and other wallets is the same. Every transaction entails two parts: the sender and the receiver. To explain it in simpler terms, consider an online bank transaction. The sender would require the bank details like the account number and IFSC of the receiver. The same is true for a cryptocurrency transactions also. The sender would need the cryptocurrency address of the recipient. 

To access the desktop wallet, a username and password are required. The scams in the crypto industry are on the rise. Users use additional security methods like 2-factor authentication (2FA) to curb this and safeguard their assets. Once the wallet is activated, users can interact with various cryptocurrencies on several blockchains.

Most wallets are “lite” wallets that rely on verified transactions by digital signatures validated by the private key and can handle multiple cryptocurrencies. However, others, referred to as “full node” desktop wallets, let users download an entire blockchain for a single coin onto their laptop or PC. Depending on the blockchain, this might take up a lot of hard drive space (sometimes hundreds of gigabytes); therefore, it is only advised for very knowledgeable crypto users.

Here is how to set up a desktop hot wallet:

As the name suggests, a desktop wallet must be accessed using a computer or laptop.

  1. Visit the official website of the wallet you want to use.
  2. There would be many versions of the wallet available. Choose the one that is best for your device.
  3. Install and download the wallet.
  4. Next, use a strong password to protect your wallet.
  5. There would be a tiny box next to “Encrypt Wallet,” tick that box.
  6. After deciding where you want your new wallet to be saved, click next and wait while the application downloads the entire blockchain.

Mobile wallet

JtX85UR7lTZloS5ovR6Gq0wV OZ5Rcog7NUtydH68EnnzElxdlh4gZATeV2d w4JV7QpBYz4KuUB YNrO dipnXyzWYiTahzrFSm0qCAvPIKOSXlKKSp1o0tSl5h DCR clTdHn9Zv mAiIJpfCV3wuS5V 7wtC7mFa F69bjsjoIlr 9yoV54FvpcUQ

Image Source: Freepik

Mobile wallets are more portable than desktop wallets. If your mobile cryptocurrency wallet is on your primary phone, it is always with you. This is its most significant disadvantage, as many people are hesitant or even enticed to carry their cryptocurrency with them at all times. Even if your mobile crypto wallet has a PIN and recovery phrase, you could jeopardize your assets if you have yet to take adequate safeguards.

The other alternative to this is the use of second phones solely for cryptocurrency. These secondary phones typically have a “cold” wallet, which is more secure than using your primary phone while offering virtually the same degree of ease. This second phone would typically be turned off and not have a phone plan. To conduct a transaction, you switch it on and pair it with your primary phone via WiFi or Bluetooth. After completing the transaction on your primary phone, you would instantly disconnect and turn off your secondary phone, which was holding most of your money. Only sending or selling money necessitates turning on your secondary phone; you can still receive transactions with it off.

How to set up a mobile hot wallet:

Setting up a mobile hot wallet is as easy as creating your profile on any social media account.

  1. Go to your Apple or the Google Play store. Search for your desired mobile wallet app and hit the download button.
  2. Once the app is downloaded, create your profile on it. You would be asked for basic details like name, email address, and password.
  3. Set a strong password. This password would safeguard all your assets, so ensure it is unpredictable; only you know about it.
  4. Complete the two-step verification using your email and mobile number.
  5. The setting up process is complete. You can now use the wallet to start buying cryptocurrencies. If you already have crypto assets, you can add them to the wallet and start trading.

Web wallet

Users can use a web wallet to transact in cryptocurrencies through the web browser. There is no need to download or install any software. The advantage is that the web wallet can be accessed from any location and device. However, the drawback is that a third party hosts the wallet. This removes direct control from the users posing a threat to their cryptocurrency assets.

A web wallet eliminates any risk of unintentionally deleting software since an intermediary party handles it. Therefore, you won’t lose your bitcoin even if you remove the wallet from your computer. 

These wallets significantly reduce control. A third party is responsible for preserving the integrity of your wallet and keeping the private keys secret. Users must have complete trust in these service providers since they can disappear with the money – and there is no government-backed insurance plan to cover deposits. Use web wallets only if you have complete confidence in the service provider managing them.

Online web wallet companies are building their ecosystems. A prime example of this is Coinbase. Coinbase gives both trading and storage options to users. A feature of cryptocurrency is maintaining anonymity. However, many countries are now forcing exchanges to follow AML and KYC banking rules leading to a breach in this feature.

Setting up a web hot wallet:

Setting up desktop hot wallets is eerily similar to mobile hot wallets. The only difference here is the medium of accessing the software.

  1. Visit the website on which you want to set up your wallet (for example, MetaMask wallet).
  2.  On the webpage, select the sign-up option.
  3.  Fill in your details as prompted by the site.
  4.  Pick a strong password. Again, this password is the key to your assets; set a strong one.
  5.  Verify your email address and mobile number if prompted.
  6.  Your desktop hot wallet is now set up. You can start trading by buying or transferring cryptocurrency to your wallet address.

How to install a hot wallet?

Step 1: Download the wallet

Visit  https://metamask.io/ and click on “Download.”

D1 58CPh4 toCnFAcRg0fJWvNU7v lPvDIjlp5V 7p46LxfLY AV9IT8VNGORUZ6RZ99m7iMm75WI3GhYDLKT rhK QeyvB4FTKkvmym3CI sK9ht2kFcDtcIM5vqfY7h5zyG mZDPHNJdvnUeapyzaTQHIpggd zECirCzsaaDFuT aGIqMYP9QnFQ 9g

MetaMask is compatible with five browsers. After selecting your preferred browser, click on install. I have used the Chrome extension here.

08sFCF6Rx37LeSpm0vL3HLt9DX6uuUtV aMmqneBbqHYm0D7UZcCTdopznAeAW2UlOiIQK8MJKhOL973

Step 2: Install the extension 

Click on “Add to Chrome” and “Add extension.”

AvbYt0uSQrA1kSN5sA332nxPY9CE201ogXL5Ii0Y5JFYmF7FGcZNwUNC4 IAF6s182iIe07FLHn68Lhqz3zSAaXZcZu 2g4o L5 8F1h1WXVH1045oGEbW165Jn0EQ4TLEj14c3pNOU5U0k MEadjqS2dkRkTnfSiPGet4cekgDtph 7HKsr7GNCc49LZw

6KkJYioXs0cOnCi5pLsivmG9HEnDDE3bh8NTemESSuHm1t8sGdfGtC5g80yqhXBQSHZqfJI8mWXR58G0shEt h2pZ3mz Wf5YTb069Vep2oHC0ngUcJOT5XiKCIeM7 BN4kPAQ2DU86GF5YOgK1kQc9d6gdh6PpL0s1T63H8vrY4 VEDkONQPG XRHoLzA

Step 3: Metamask wallet installation

Once you have installed the extension, a new webpage would open. Click on “Get started.”

9Gub9xUIsCXUGqTKLbfTYPNhWpqrCPopNxSP70iSsgB4zw1mCbCTNfjkQyCNQVI00fHthT7FCbAulWvz8iapFeZoy5e1vcxLcRRJ4kMYUXr3EsJ0 a hDK2HOC2TMCMfOhU0YYrwHK2BPS5ckgoQa DphrdDB1cnPiWs NEtfdIRPIu5C8YIhueDXlsvRg

Next, read these instructions, and if you want to help improve MetaMask, click on “I agree.” Otherwise, click on “No thanks” and proceed ahead. 

at 2COMeYumyXXJzFmmtjHWvQ3cPOUawRYOslJqunseiFaAyElpqVwW5oc0f6 MbVqVg04IyZZGdLb3IBnzGeBmRFO8wFGm3ZfyJXxY5iRLppWbHKZnqlzm2Jatfd g2KlBcrB2AiSLWDxb L4LYawYu4C6Mr4pPi4mQU9B7KE24cY7GBah8IsgPJYfIJA

On the next page, there are two options. The first option is for those who already have a wallet and would like to import it. The second one is for those who do not have a wallet and would like to create a new one using the seed phrase.

pXVWbHBnHfdd6fgwsuQY4T3c8y44rPjO mfFH48PsimgtUKes2hcUZNvr E au0ZLI1cRnRlUi1mVbNbYeZ zvmZZqjBq7KnGQTGmBr9H3XVkyYAf JLYeBaTVJSL7bUGoICMuH76ZsRfrc1SS09C PwLtNNd5941Grlr1XPToTh qATQUOXdjsKo5eCHQ

Step 4: Create a strong password

I40CLklfwMbnCyWuFtO1pItCodRVIjRQkGzo3 3A2p8e71KjovNKERFJvgzTsedG1Ul SQGA6439bdQiKWqcETL4vs21r P3dGX806VBfvfORzYAovg31pBqfmCI0G9ty6mpjwwu3c6wNlDljc8MQmBVm4ZXgDpico vgv 06ba2RmMDFuwt8CCqhdgSw

Seed phrase for hot wallet

Step 5: Securely store your seed phrase

In case you are new to creating a hot wallet or have just started as a cryptocurrency investor. We advise you to watch this entire video to understand the importance of a seed phrase. 

N35LI3XzmvqQX

Once you have understood the importance of keeping this secret recovery phrase safe, click the button below to expose it.

ILXqV OaeHXvzg xPOAzHzmbgXqRkIzIk IjHV1TWi1OSIlz8KnJP

The seed phrase revealed below is just for educational purposes. Never reveal your seed phrase to anyone under any circumstances. Put your seed phrase in writing and store it safely.

0Fi9W1ldbuR hze9X1VG9j7IvpyQU5i2Urh whw1VSVMbaJIsxSHWGQ3NIIElHO0c1S2nfJY0xlh6RJxNnborksbMfk0dX840 YIo1Ya0xUBjBcLjQLG9cVq9O5LPyH8kryNfqoAKdie46LNPtAG olU 4TwTe5UhntHYKdKgXzo RaRUQlo6XrYJG406g

A very important reminder:
  • You must keep your seed phrase in a secure location to use MetaMask. The most popular way is writing your 12-word phrase on paper and keeping it securely in a location only accessible to you. Note that if you misplace your seed phrase, MetaMask won’t be able to help you locate your wallet, and your money will be permanently lost.
  • Never provide anyone or any website your private key or seed phrase unless you want them to have complete access to your funds.
  • Never reveal your seed phrase to anyone; type it in an email, give it to a support person, or store it online. Use it only if you reinstall Metamask, and even then, make sure you go to Metamask.io.

Step 6: MetaMask seed phrase confirmation

In this step, you have to verify your seed phrase. Click on each word in the sequence that appeared on the previous screen. This step is important to know that you have written your seed phrase properly. After completing the formation, click “Confirm.”

gCvxh0Dy7aimkQvH4wiPH8z3JT9KUj3KdANBMXONDw 7N tv9NFSVXAC46A3EmRST75ECvi8vqtIP5gMZEUFyhnwOqy AAZXL CNPA1HdhEi86MKO2k2ex24IpooqI60hZN58IeSkq WatATLNqFGcuAEhYmidI8GCnUvS iJcVsyquT5omy9zGCliuJVQ

The setup of your wallet is now complete.

To access your wallet, select the MetaMask symbol in the top-right corner from the extensions bar of your browser.

ZHFjbh7OBqEdjS mqVIMV T1sAuE jRun4apodldtXHvHOTo2EWfjOOIViVWo6kesB7LGXyCDLiMP3G4zf3bPrdM9A7zPljmeA4O0JpiIYksosofbGgOxwDAHaHoVnyfb9LysEYM2x JP STT9RPebGUBMpBwVMK iY1Pgal71LCPNwGaY3nuvjR98E2sg

Clicking on the extension, the wallet would look like this.

v2Sd EF6 wri0vywSQ j5fcC7MGlYHctp5dkwd A6koxH1J76BG3AB8gWpffRZXVzA4LaflVZrR36glIlZcAeb9u

NOTE: Use the same seed phrase to access the MetaMask wallet on your mobile phone.

Hot wallet and security concerns

Like any internet technology, hot wallets are prone to security breaches. The end user’s behavior determines the security and safety of the hot wallets. Hot wallets function online, with private and public keys stored virtually. Hence they are prone to security problems.

The easiest way to hack a hot wallet is by knowing the username and password. NASAA (North American Securities Administrators Association) has warned investors that cryptocurrency-related fraud would pose a significant threat to their wealth. The emerging methods of these frauds are message interception and online spoofing.

A hot wallet can be compromised easily, so users should store only those funds that are required in the immediate future. Until there is a need to use the additional funds, it is advisable to keep most digital assets offline or in a cold wallet with backups of the private keys.

Conclusion

Ultimately, wallets are judged by their affordability and security, no matter how they are accessed. The wallet would be secure if the cloud or the infrastructure it is built on is also secure.

References:

How to Create a Crypto Wallet: Complete Beginner Guide

Desktop Wallets: How They Work & When to Use [2022] | BitPay

Mobile and Desktop Crypto Wallets: How to Choose | Gemini

What is a crypto web wallet? – Quora

Hot Wallet | Corporate Finance Institute

How to set up a MetaMask crypto wallet, your gateway to Ethereum | ZDNET

You Might Also Like

An Easy Guide to Crypto On and Off-Ramps

What Are the Top 3 Blockchain Myths?

All There is to Know About Account Abstraction: Ethereum’s ERC-4337 Standard

Next Big Thing in Crypto: All you need to Know About Move-to-Earn (M2E)

What Is Decentralized Storage and Why Is It Important?

Share
Previous Article Crypto Careers The Most Lucrative Crypto Careers
Next Article cold wallet Secure Storage of Crypto Assets: Guide to Setting up Cold Wallet
- Advertisement -
Token 2049 Singapore
Discount LinkToken 2049 Singapore
Discount Link

Follow US

Find US on Socials
Facebook Like
Twitter Follow
Instagram Follow
Explore
Cryptocurrency Wallets
Cryptocurrency Wallets: Explained
Hot Wallets
Top Non-custodial Hot Wallets
4 Ways to Identify Crypto Ponzi Schemes
4 Ways to Identify Crypto Ponzi Schemes
Top 5 Crypto Job Boards to Get Hired Instantly
Top 5 Crypto Job Boards to Get Hired Instantly

Subscribe to our newslettern

Get Newest Articles Instantly!

Explore More

a hyper-realistic painting of dollar sign next to a bitcoin
Adoption

An Easy Guide to Crypto On and Off-Ramps

March 20, 2023
A hyper-realistic painting of a portrait of a person with a thought bubble thinking about blockchain
Adoption

What Are the Top 3 Blockchain Myths?

March 9, 2023
Alt Description: An image with a standout Ethereum logo and several other connected ethereum logos on a blue background describing account abstractions.
Adoption

All There is to Know About Account Abstraction: Ethereum’s ERC-4337 Standard

March 9, 2023
An image describing how the move-to-earn ecosystem works; It shows a person in motion staring at their mobile device in the background is a larger mobile device with five different huge dollar signs.
Adoption

Next Big Thing in Crypto: All you need to Know About Move-to-Earn (M2E)

March 9, 2023

Follow Us on Socials

We use social media to react to breaking news, update supporters and share information.

Twitter Facebook Youtube Telegram Linkedin Instagram Rss
Droomdroom Logo Droomdroom Logo

DroomDroom dedicates thousands of hours of research into the web3 industry to deliver you free, world-class, and accurate content.

Company

  • About Us
  • Contact Us
  • Partner
  • Careers
  • Privacy Policy
  • Terms of Service

Subscribe to our newsletter

Get Newest Articles Instantly!

- Advertisement -
Token 2049 Singapore Discount LinkToken 2049 Singapore Discount Link

Copyright © 2023 DroomDroom. All Rights Reserved

  • Bitcoin
  • Altcoin
  • Metaverse
  • NFTs
  • DAO
  • DeFi
  • Adoption
  • Regulation
Welcome Back!

Sign in to your account

Lost your password?